State lawyers told of hidden funds

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SACRAMENTO, Calif. - A former California state parks employee says she told state attorneys that her department was hiding about $20 million in a special fund several months before officials announced discovering the surplus money, according to a sworn declaration filed in court Tuesday.

The development is the latest revelation in a budget scandal that has state officials on the defensive and threatens to undermine Gov. Jerry Brown's push for a voter-approved tax increase.

The court declaration from Cheryl Taylor, a former parks employee, raises further questions about what state officials knew, when they knew it, and what action, if any, they took before the California Natural Resources Agency revealed the hidden pot of money in July.

Such special funds contribute to the state's general fund budget each year as lawmakers take millions of dollars in loans from the funds to close budget deficits.

To plug this year's budget gap, the governor proposed closing 70 state parks to save $33 million over two years, prompting a scramble by local governments and nonprofits to raise money and keep most of the parks open this summer. Brown also has pushed a message of fiscal responsibility as he has urged voters to increase the state's revenue by approving a tax hike in November.

The administration said it publicly disclosed the accounting problem within 48 hours of the discovery in July.

But, according to Taylor's statement, officials should have known much sooner, said Elisa Stewart, a San Francisco attorney who filed the declaration.

"Maybe they wouldn't have come back and said we need to close 70 parks," she said. "So much could have changed."

Taylor, according to her statement, first told a representative of the state attorney general's office in January about the hidden $20 million and that the budget manager for the parks department had warned employees to keep the underreporting quiet.

Taylor's declaration is part of a sexual harassment lawsuit naming Manuel Lopez, the state parks' former budget manager who is at the center of multiple investigations. State attorneys were tracing an unauthorized vacation buyout program organized by Lopez when they questioned Taylor about department finances.

Her sworn declaration, filed in Sacramento County Superior Court, says she told Deputy Attorney General Corrine Lee Murphy and parks department staff attorney Jennifer Comilang in April that she "was aware of the under reporting of funds," but that Lopez had told her not to report the information. She also told the attorneys that Lopez had ordered her to demote an employee who reported the $20 million surplus in the spring of 2010.

Taylor said in her declaration that she had a similar conversation by telephone in January with the state Department of Justice, which is run by the attorney general's office. She recalled explaining the department's budget "in great detail" as she discussed whether Lopez would have access to department funds without going through the Legislature.

She did not name the individual, but remembered the conversation as being within days of Gov. Jerry Brown proposing his budget on Jan. 5. The attorney general's office assigned Murphy to the investigation Jan. 9, according to her official report.

It's unclear if the state attorneys relayed Taylor's information to anyone else.

The attorney general's office and state parks department declined comment, citing the ongoing investigation into the underreported money.

The attorney general's office and the state Natural Resources Agency initially told The Associated Press they were looking into Taylor's account and would provide details, then declined to do so.

Lynda Gledhill, a spokeswoman with the attorney general's office, said she could not comment on Taylor's declaration because the matter fell under attorney-client privilege.

"We are as interested as anyone in getting to the bottom of these things," resource agency spokesman Richard Stapler said. "... We really need to let the investigation play itself out."

One legal expert said the state attorneys had a duty to tell others if they recognized the significance at the time.

"Clearly, there's an obligation to report up the chain, assuming that the facts are such that a reasonable attorney would realize that a crime or civil wrong has been committed," said John Sprankling, who teaches professional responsibility at the University of Pacific McGeorge School of Law in Sacramento.

Former state parks director Ruth Coleman resigned last month once the surplus was disclosed. Lopez previously told The Sacramento Bee that he informed his supervisors about the underreported money, a claim Coleman denied.

The resources agency said the parks department failed to report $20 million in a special recreation fund and another $34 million in a special fund for off-highway vehicle activities to the state Department of Finance, which uses department reports to write the annual state budget plan.

Natural Resources Agency Secretary John Laird said last month that the hidden money was found in July by a new park fiscal staff member while the attorney general's office was examining the unauthorized vacation buyouts by parks employees. Taylor's court declaration says the attorney general's office knew as early as January.

Taylor, who now works for the California Department of Transportation, is not an alleged victim of the sexual harassment alleged in the lawsuit, but other parts of her declaration address whether Lopez acted inappropriately with his employees.

Lopez did not return a telephone message left at his home. Messages were not returned by John Randall Andrada, an Oakland attorney representing Lopez in the sexual harassment lawsuit or by Marc A. Caraska, a Sacramento attorney representing Lopez in a personal bankruptcy.